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When it comes to saving and investing, time matters.

Money you need soon shouldn’t be in the stock market. Money you’re investing long term — like for retirement — shouldn’t be in a plain old savings account. Why? Because despite a few rate hikes from the Federal Reserve, the average rate of return for savings accounts is still a measly 0.09% — or 90 cents per year for every $1,000 you deposit.

Before you decide on a short- or long-term investment, think about what you’re investing for and how liquid — or accessible — you need your cash to be. A timeline can help. Dream trip to Tahiti in seven or so years? Your timeline is flexible. Dream trip to Tahiti for your 10-year wedding anniversary? Check with your partner, but that might fall in the hard-and-fast deadline camp.

You also need to consider the risk you’re willing to take, which affects how much of a return you get, when deciding where to save or invest. In general, more risk and less liquidity = bigger return.

Here’s how to invest money for short-, mid- and long-term financial goals, followed by an explanation of each.

Best investments for a short-term goal or emergency fund

Online savings or money market account

A 0.09% savings account return might be the average, but it certainly isn’t all you can get. If you’re willing to stash your money in an online savings account, you can earn upward of 2%. To be clear, this is more saving than it is investing. Your money will be FDIC insured against loss. But you shouldn’t be after a big return; liquidity is the name of the game here.

Banking online doesn’t mean you have to give up the conveniences of your neighborhood bank, though you can’t walk in a door to a line of tellers who know your name. But you can still do most if not all of the important banking duties: Deposit checks by scanning them with your phone, move money back and forth between accounts, and speak with a customer service rep by phone or live chat.

A money market account functions like a savings account, but generally has higher interest rates, higher deposit requirements, and comes with checks and a debit card.

Best investments for an intermediate-term goal (money you need in three to 10 years)

A bank certificate of deposit

If you know you won’t need some money for a set period of time and you don’t want to take any risk, a certificate of deposit (CD) might be a good choice. You can find CDs with terms ranging from three months to six years. In general, the longer the term, the higher the interest rate (you expect more return in exchange for your money being less accessible).

How to invest moneyIf you want to make your money grow, you need to invest it. Learn the fundamentals, how best to reach your goals, as well as plans for investing certain sums, from small to large. Read more »

CDs aren’t ideal during a rising interest rate environment, because they effectively lock your money away at a fixed rate, with a penalty of between three and six months’ interest if you withdraw early. Being stuck in a low-rate vehicle while interest rates are climbing is kind of like eating a salad during a pizza party: sad.

If you go this route, and you’re concerned that interest rates will go up, you can consider a few other options:

A laddered CD strategy combines several CDs with varied terms. If you have $10,000 to deposit, you might put one-third in a one-year CD, one-third in a two-year CD and one-third in a three-year CD. That way, if interest rates are higher after a year, you can pull funds out of that one-year CD and move it to something with a better rate, capturing a higher return for at least a portion of your savings.

A bump-up CD allows you to request an interest rate increase if rates go up during the CD term. You can generally request this increase only once and there may be downsides. For example, these CDs may have a lower-than-average initial interest rate and higher minimum deposit requirements.

A step-up CD is like an automated bump-up CD. The rate is automatically increased at set intervals during the CD term; you don’t have to do anything. But the initial interest rate is likely to be low.

Short-term bond funds

Bonds are loans you make to a company or government, and the return is the interest you collect on that loan.

As with any loan, they’re not risk-free. For one thing, the borrower could default, although that’s less likely with an investment-grade corporate or municipal bond, and downright unlikely with a U.S. government bond. (Investment-grade is a quality rating for municipal and corporate bonds that indicates a low risk of default; U.S. government bonds do not have that type of rating system but are considered very safe.)

Perhaps the bigger risk is that when interest rates rise, bond values typically go down, because the bond’s rate may be below the new market rate, and investors can get a better return elsewhere. That’s why short-term bonds are recommended here: Short-term bonds take less of a hit when interest rates go up. You can sell a bond fund at any time, but if you are selling to get out as interest rates are rising, you could face a higher loss with long-term bonds than short-term.

Through an online brokerage account, you can buy a low-cost index fund or exchange-traded fund that holds corporate bonds, municipal bonds, U.S. government bonds or a mix of all of the above. This will diversify your investment, as the fund will hold a large number — often thousands — of bonds. These funds can have minimums of $1,000 or more; online brokers also have account minimums, though several require no initial deposit.

Most stock brokers offer a fund screener that will allow you to sort funds by performance, expense ratio and more. Because you’re not investing in a retirement account, you might consider a municipal bond fund; municipal bonds are federally tax exempt, making them a good choice in a taxable account.

If you’re looking for a college savings vehicle, one of the best options is a 529 plan. It isn’t an investment itself, but an account that allows you to save and invest in a tax-advantaged way; the money you contribute grows tax-deferred, and qualified withdrawals for education expenses are federally tax-free.

Most 529 plans offer a selection of age-based options — which are pre-built portfolios or funds that are diversified and will automatically rebalance to take more risk when your child is young and less as he or she approaches college — as well as the option to build a portfolio yourself.

If your child is within 10 years of college, you’ll likely want to skew heavily toward the bond funds discussed here or an appropriate age-based option. If you have a longer time horizon, you can take more risk with equity funds (discussed in detail in the next section on long-term investments). Be sure to pay attention to the plan’s fees and investment expenses. NerdWallet has a tool that can help you find the best 529 plan for you.

Peer-to-peer loans

Peer-to-peer loans are just what they sound like: You loan money to other people in exchange for interest. This isn’t done in dark alleys or via an IOU to a friend — or at least, it shouldn’t be. There are online platforms specifically for this purpose: Prosper and Lending Club are the biggest, and they connect you to borrowers all over the country.

These borrowers are typically assigned a grade based on their creditworthiness, allowing you a little control over how much risk you take. You can choose to lend money only to borrowers in the highest credit tiers, though even those loans are not risk-free. (To be clear, this is the highest risk option of these intermediate-term investments.)

Just like in a standard lending environment, the interest rates charged to low-credit borrowers are higher, meaning the more risk you take, the higher your potential return. But even with loans to highly qualified borrowers, you can earn a pretty decent return: Prosper says loans with the best rating — AA — have historical returns averaging 3.7%; Lending Club’s highest-rated loan is tagged A and has an average borrower interest rate of 4.84%.

To minimize risk further, you should diversify your investment in these loans as you would diversify any other investment. Rather than plopping your money into one or two loans, spread it around in small chunks, lending in increments of $25 (when you do this, you band together with other investors to make up the total of the loan).

One other important note: You’re locking up your money with these, or at least a large portion of it. When one of your borrowers makes a payment, it is distributed among the loan’s investors and you can either withdraw that money or reinvest it, but you generally can’t pull out your full investment before the loan term ends. You should consider P2P loans mostly illiquid for the length of the loan.

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Best investments for a long-term (at least 10 years) or flexible-deadline goal

First, a word here about account choice: The vast majority of long-term goals are retirement-related, which means you should be investing in a tax-advantaged account. That’s a 401(k), if your employer offers one with matching dollars, or an IRA or Roth IRA if your employer doesn’t. Here’s how to decide whether you should contribute to a 401(k) or IRA, and then how to decide between a Roth and traditional IRA.

If your long-term goal isn’t retirement, or you’ve maxed out the contribution limits of these accounts, you can open a taxable brokerage account (consult our picks for the best brokers). One major difference, aside from the tax treatment: You can put as much in a brokerage account as you want, and pull money out at any time. IRAs and 401(k)s are designed for retirement and often impose penalties and taxes on distributions before age 59½.

Equity index funds

In general, you only want to play the stock market when you’re investing for a time horizon of 10 years or longer. And even if your deadline for using the money is flexible, you need to come to terms with the fact that you’re taking on more risk and might lose money.

For goals of 10 years or more, it makes sense to put at least a portion of your savings toward equities (stocks), because you have the kind of time horizon that can weather market ups and downs. And you can always dial back the level of risk you’re taking, for instance moving more toward bond funds as your goal date approaches.

One of the best ways to build a diversified portfolio is to purchase low-cost equity index funds. These funds track an index — say, the S&P 500 — and by track, we mean they aim to keep pace with it; nothing more, nothing less. This is a departure from an actively managed mutual fund, which employs a professional who tries to beat the market (and, in reality, rarely does). As you can imagine, the latter has higher fees to account for that professional’s salary, and often doesn’t make up the difference in performance. That’s why index funds tend to rule the roost.

Look for a no-transaction fee fund with a low expense ratio that invests in a broad market index — again, the S&P 500 is a good example. Another good example is a total stock market index fund, which gives good exposure to a broad range of U.S. stocks. As you add more money to your portfolio, you can diversify further by buying index funds that cover international equities and emerging markets equities. You may also want to temper some of that risk with a bond fund (more about this down the page).

You can purchase index funds through a brokerage account or retirement account. They tend to have minimums of $1,000 or more, though there are exceptions.

Equity exchange-traded funds

Exchange-traded funds are a form of index fund that trades like a stock, which means you buy in for a share price rather than a fund minimum. That makes these funds easier to get into if you’re starting with a small investment, and easier to diversify, because you may be able to buy several funds with a relatively small amount of money.

Other than that, they have all the perks of index funds: Passive management that tracks an index, low expense ratios (in many cases — never assume a fund is inexpensive just because it’s an index fund or ETF), and the ability to buy a basket of investments in a single fund.

Nerd Tip:

One thing to watch out for with ETFs: Because they trade like a stock, they can be subject to a broker’s trade commissions. But many brokers have a list of commission-free ETFs that can be traded at no charge, and you’ll keep costs down if you stick to that list.

Total bond market funds

Current potential annual return: 2% to 3%, based on historical averagesPros: Balances out stock exposure, low risk for a long-term investmentCons: Lower return, may have minimum investment requirement, fund fees

Much of the details here are the same as for short-term bond funds discussed above, so we won’t rehash. The shorter your time horizon, the more of your portfolio you might choose to allocate toward bonds; the longer, the more you’d allocate toward equities.

But many people choose to hold at least some bond allocation — even for a very long-term goal, like retirement — just to balance out risk. A low-cost total bond market index fund or ETF is a good way to do that. It gives you wide exposure to government, municipal and corporate bonds with a range of maturities. You can diversify further with an international bond fund.

Robo-advisors

Like 529 plans, robo-advisors aren’t an investment themselves, but a way for you to invest. These services manage your portfolio: You provide details about your time horizon, goals and risk tolerance, and you get a portfolio to match, often built with ETFs, in either an IRA or taxable brokerage account.

The portfolio will be rebalanced as needed, and — if your money is in a taxable account — robo-advisors perform tax-loss harvesting to lower your tax bill. You’ll pay for the trouble, but the fees are reasonable compared to a human advisor: generally 0.25% to 0.50% of assets under management, plus the expense ratios of the funds used. All in, you could pay under 0.50% for a managed, relatively hands-off portfolio tied to your time horizon and risk tolerance.

That means this could be a suitable choice for intermediate-term investments, as well — though most of robo-advisor portfolios have some level of stock allocation, so you’d have to be comfortable with a bit of risk.

Last note: You’ll find a range of account minimums from robo-advisors, between $0 at Betterment and $100,000 at Personal Capital. Consider this when choosing the best advisor for you.

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